CANADA’S KYOTO IMPLEMENTATION PLAN: A CHALLENGE FOR ALL CANADIANS

1. CANADA’S KYOTO IMPLEMENTATION PLAN: A CHALLENGE FOR ALL CANADIANS PRESENTATION TO THE SENATE COMMITTEE ON ENERGY, THE ENVIROMENT AND NATURAL RESOURCES BY JOHN R. DILLON CANADIAN COUNCIL OF CHIEF EXECUTIVES THURSDAY, APRIL 3, 2003 OTTAWA

2. Kyoto and the Canadian Challenge Key Parts of the Federal Plan Trade and Competitiveness The International Dimension Essential Elements of a True National Plan OUTLINE

3. EMISSIONS BY SECTOR IN 2010 Projected Growth in Emissions 1990 - 2010 Fossil Fuel Industries 64% Other 46% Transportation 34% Commercial 31% Electricity 25% Agriculture 16% Industrial 10% Residential -2%

4. 2010 business as usual forecast Minus Kyoto target Equals a gap of about Current policies and programs Agriculture and forest sinks Large industrial emitters New targeted measures Government purchase of credits Unaccounted for 810 MT 570 MT 240 MT 50 Mt 30 Mt 55 Mt 35 Mt 10 Mt 60 Mt 240 Mt CLOSING THE “GAP”

5. Kyoto “gap” is 240 million tonnes and growing Means 30% reduction in relatively short time Kyoto target would require national energy efficiency gains 3 to 4 times our best efforts Canada’s economy and population are growing faster than most other countries Exports of energy intensive goods are key driver of Canadian jobs and standard of living Canada one of the few OECD countries that is a net exporter of energy SIZE OF THE CHALLENGE

6. Largest, most energy intensive industries – oil & gas, electricity, steel, chemicals, mining, etc. Federal plan calls for sector covenants and emissions trading scheme with goal of 15% reduction from 2010 BAU levels (55 Mt) Framework agreement + individual sector and/or sub-sector emissions intensity targets Allocation between sectors unclear “Regulatory/financial backstop” will be set Promise of $15/tonne price protection and maximum reduction of 15% for oil &gas LARGE INDUSTRIAL EMITTERS

7. Targeted measures – new programs, regulations and spending re SMEs, housing, agriculture, transportation, commercial & municipal Budget 2003 committed additional $1.7billion Engaging Consumers Federal government has downplayed consumer role/impact Only general goals, e.g. Canadians to consume 20% less energy, drive 10% less No appetite for new taxes, higher energy prices THE FEDERAL PLAN

8. Emissions growing ahead of NRCan forecast Unclear how consumers will achieve 20% cut Existing measures may not deliver 80 Mts Lasting solutions expensive (e.g. public transit, fuel switching for utilities, building retrofits) What is cost to Canada likely to be? Analysis to date based on low BAU forecast, optimistic assumptions & low carbon prices Would Canadians support large credit purchase from Russia to make up the difference? CAN WE ACHIEVE THE TARGET?

9. Emissions intensity basis, i.e. allow for growth Goals geared to technical and economic feasibility and capital stock turnover, not merely allocation of artificial target Need to recognize those that have already acted Identify technology options/priorities Harmonized fed/prov approach essential Clear and simple reporting system Policy certainty for long-lived capital projects Government commitments in return -- regulatory streamlining, tax, incentives, etc. KEY REQUIREMENTS FOR INDUSTRY

10. Energy-intensive Cdn. commodity producers are price-takers in the international market Competition from US and developing countries Canada is only NAFTA and FTAA partner to commit to a Kyoto target Competitiveness and profits drive innovation Canada has been losing share of FDI – fierce competition for next new investment “Large industrial emitters” scheme will essentially impose a tax on already efficient firms TRADE AND COMPETITIVENESS

11. Many provinces have raised significant concerns with federal implementation plan Even if fed-prov process gets back on track, governance structure of national plan unclear Who will ensure best value for taxpayer $ Provinces have key responsibilities – resources, transportation, etc. Role of municipalities also key – urban planning, transit, waste, etc. Efficient, harmonized federal-provincial policy, program and regulatory framework is essential GOVERNMENTAL COOPERATION

12. United States is pursuing different path – focused on improving science, promoting technology and reducing emissions intensity No real solution without US and developing country commitments – less than 1/3 of global emissions covered by Kyoto targets Developing and economies-in-transition rely on carbon-based energy for economic growth 2nd commitment period negotiations start in 2005 Enforcement mechanism unclear – some countries may resort to trade remedies THE INTERNATIONAL DIMENSION

13. EUROPEAN PERFORMANCE

14. Longer-term strategy – beyond 2012 Enhance innovation Investments in breakthrough technologies Commercialization of promising technologies Assistance to consumers & business to adopt new technologies Regulatory efficiency and reducing barriers Sensible targets for industry “Be the best that we can be” Enhance competitiveness & GHG performance ESSENTIAL ELEMENTS OF A TRUE NATIONAL PLAN

15. Effective consumer mobilization and education re behaviour change Long-term public investments, e.g. transit All jurisdictions must work together effectively Ensure public investments maximize environmental and economic benefits Re-engage US in sound North American approach Speed technology development and benefits to developing countries Well thought-out, coordinated and long-term climate change plan more essential than ever ESSENTIAL ELEMENTS OF A TRUE NATIONAL PLAN (Cont’d.)